Deciding whether to sell your home and buy your dream home when you retire is a complicated question. There are a lot of things to consider when making this decision. You have lifestyle choices on one hand and financial realities on the other. There is no one-size-fits-all home solution. The solution is to weigh all your options and determine what will best meet your needs and realistic wants.

Financial Ramifications:

Based on national averages, people ages 65 and up have more than $200,000 in home equity, according to a 2015 Merrill Lynch study, yet they have less than half that amount in retirement savings. Without proper financial planning, committing to your dream retirement home can be a serious mistake with long-term implications. The first step is to sit down with your financial/retirement planner, who can help you make the financial decision that makes sense for your personal situation and plans for retirement. You will need to consider your monthly payments, down payments, and the tax impact of withdrawing funds from a retirement plan. All of these will affect your overall financial situation.

You also need to plan for future needs when deciding to purchase a new home. If you are moving into an HOA community, be sure to review fees and maintenance trends over the past few years. While the current fee may be manageable, it is important to understand those fees can increase in the future and you need to be prepared to handle the change. Also, consider future home maintenance – if the home is older or the systems are older, you may be looking at some costly replacements in the nearer future. Will you be able to set funds aside to be ready for any large maintenance projects?

Social and Personal Ramifications:

We need to look ahead and plan for our futures when making housing decisions. Many people purchase homes based on where they are and what they want today. They don’t always think about how their needs may change. Many of our lives revolve around social activities, families, friends, kids, and grand-kids. Consider where you see yourself in the next 10-15 years. Will you have a strong support system nearby? Will you still be able to drive in 10 years? 20 years? If not, is the location of your house or your potential new house suitable for you to maintain your lifestyle? Not being able to go to your favorite store, church, or a friend’s home without assistance can impact your social life and personal life drastically.

Given how many factors are at play, it’s not surprising to know that many people put off running the numbers and exploring all their housing options before retiring. It can be very overwhelming, and people may not know where to start. Creating a plan for your future should begin as early as possible. It is recommended that by your mid-50’s, you should be looking at your current and future financial and social situations and working to put a plan together for your retirement, including deciding where you are going to live.